Question 1

The lower the price,the lower the consumer surplus,all else equal.

Accepted Answer

A) True 
 B)False

Question 2

Suppose your own demand curve for tomatoes slopes downward.Suppose also that,for the last tomato you bought this week,you paid a price exactly equal to your willingness to pay.Then

Accepted Answer

A)   you should buy more tomatoes before the end of the week.
B)   you already have bought too many tomatoes this week.
C)   your consumer surplus on the last tomato you bought is zero.
D)   your consumer surplus on all of the tomatoes you have bought this week is zero.E) A) and B)
F) A) and C)

Question 3

A seller's willingness to sell is

Accepted Answer

A)   measured by the seller's cost of production.
B)   related to her supply curve,just as a buyer's willingness to buy is related to his demand curve.
C)   less than the price received if producer surplus is a positive number.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 4

All else equal,a decrease in demand will cause an increase in producer surplus.

Accepted Answer

A) True 
 B)False

Question 5

At the equilibrium price of a good,the good will be purchased by those buyers who

Accepted Answer

A)   value the good more than price.
B)   value the good less than price.
C)   have the money to buy the good.
D)   consider the good a necessity.E) A) and B)
F) A) and C)

Question 6

Consumer surplus is the

Accepted Answer

A)   amount of a good consumers get without paying anything.
B)   amount a consumer pays minus the amount the consumer is willing to pay.
C)   amount a consumer is willing to pay minus the amount the consumer actually pays.
D)   value of a good to a consumer.E) B) and D)
F) B) and C)

Question 7

Figure 7-20 
-Refer to Figure 7-20.If 6 units of the good are produced and sold,then

Accepted Answer

A)   consumer surplus is maximized.
B)   producer surplus is maximized.
C)   the sum of consumer surplus and producer surplus is maximized.
D)   the marginal value to buyers exceeds the marginal cost to sellers.E) B) and C)
F) A) and D)

Question 8

Consumer surplus is

Accepted Answer

A)   a concept that helps us make normative statements about the desirability of market outcomes.
B)   represented on a graph by the area below the demand curve and above the price.
C)   a good measure of economic welfare if buyers' preferences are the primary concern.
D)   All of the above are correct.E) None of the above
F) C) and D)

Question 9

Suppose that Firms A and B each produce high-resolution computer monitors,but Firm A can do so at a lower cost.Cassie and David each want to purchase a high-resolution computer monitor,but David is willing to pay more than Cassie.Which of the following market outcomes is efficient?

Accepted Answer

A)   Firm A produces a monitor that Cassie buys.David does not purchase a monitor.
B)   Firm A produces a monitor that David buys.
C)   Firm B produces a monitor that Cassie buys.David does not purchase a monitor.
D)   Firm B produces a monitor that David buys.E) All of the above
F) A) and D)

Question 10

Bill created a new software program he is willing to sell for $300.He sells his first copy and enjoys a producer surplus of $250.What is the price paid for the software?

Accepted Answer

A)   $50.
B)   $250.
C)   $300.
D)   $550.E) A) and B)
F) A) and C)

Question 11

Figure 7-18 
-Refer to Figure 7-18.Assume demand increases and as a result,equilibrium price increases to $22 and equilibrium quantity increases to 110.The increase in producer surplus due to new producers entering the market would be

Accepted Answer

A)   $90.
B)   $210.
C)   $360.
D)   $480.E) None of the above
F) A) and B)

Question 12

Moving production from a high-cost producer to a low-cost producer will

Accepted Answer

A)   lower total surplus.
B)   raise total surplus.
C)   lower producer surplus.
D)   raise producer surplus but lower consumer surplus.E) A) and B)
F) A) and C)

Question 13

All else equal,an increase in demand will cause an increase in producer surplus.

Accepted Answer

A) True 
 B)False

Question 14

Figure 7-19 
-Refer to Figure 7-19.If the price were P1,producer surplus would be represented by the area

Accepted Answer

A)   F.
B)   F+G.
C)   D+H+F.
D)   D+H+F+G+I.E) C) and D)
F) A) and B)

Question 15

Welfare economics explains which of the following in the market for DVDs?

Accepted Answer

A)   The government sets the price of DVDs;firms respond to the price by producing a specific level of output.
B)   The government sets the quantity of DVDs;firms respond to the quantity by charging a specific price.
C)   The market equilibrium price for DVDs maximizes the total welfare to DVD buyers and sellers.
D)   The market equilibrium price for DVDs maximizes consumer welfare but minimizes producer welfare.E) C) and D)
F) None of the above

Question 16

If the cost of producing sofas decreases,then consumer surplus in the sofa market will

Accepted Answer

A)   increase.
B)   decrease.
C)   remain constant.
D)   increase for some buyers and decrease for other buyers.E) B) and D)
F) None of the above

Question 17

Table 7-11
 
-Refer to Table 7-11.Both the demand curve and the supply curve are straight lines.If the price is $4 but only 6 units are bought and sold,total surplus will be

Accepted Answer

A)   $42.
B)   $48.
C)   $54.
D)   $60.E) C) and D)
F) A) and B)

Question 18

Which of the following will cause an increase in producer surplus?

Accepted Answer

A)   the imposition of a binding price ceiling in the market
B)   buyers expect the price of the good to be lower next month
C)   the price of a substitute increases
D)   income increases and buyers consider the good to be inferiorE) B) and D)
F) B) and C)

Question 19

All else equal,an increase in demand will always increase consumer surplus.

Accepted Answer

A) True 
 B)False

Question 20

Figure 7-17 
-Refer to Figure 7-17.When the price is P1,area A represents

Accepted Answer

A)   total benefit.
B)   producer surplus.
C)   consumer surplus.
D)   None of the above is correct.E) None of the above
F) A) and C)

Exam 7: Consumers,producers,and the Efficiency of Markets

The lower the price,the lower the consumer surplus,all else equal.

Correct AnswerverifiedShow Answer

Figure 7-18 -Refer to Figure 7-18.Assume demand increases and as a result,equilibrium price increases to $22 and equilibrium quantity increases to 110.The increase in producer surplus due to new producers entering the market would be

Correct AnswerverifiedShow Answer

All else equal,an increase in demand will cause an increase in producer surplus.

Correct AnswerverifiedShow Answer

Table 7-11 -Refer to Table 7-11.Both the demand curve and the supply curve are straight lines.If the price is $4 but only 6 units are bought and sold,total surplus will be

Correct AnswerverifiedShow Answer

A seller's willingness to sell is

Correct AnswerverifiedShow Answer

Suppose your own demand curve for tomatoes slopes downward.Suppose also that,for the last tomato you bought this week,you paid a price exactly equal to your willingness to pay.Then

Correct AnswerverifiedShow Answer

All else equal,an increase in demand will always increase consumer surplus.

Correct AnswerverifiedShow Answer

All else equal,a decrease in demand will cause an increase in producer surplus.

Correct AnswerverifiedShow Answer

If the cost of producing sofas decreases,then consumer surplus in the sofa market will

Correct AnswerverifiedShow Answer

Figure 7-20 -Refer to Figure 7-20.If 6 units of the good are produced and sold,then

Correct AnswerverifiedShow Answer

Figure 7-19 -Refer to Figure 7-19.If the price were P1,producer surplus would be represented by the area

Correct AnswerverifiedShow Answer

Suppose that Firms A and B each produce high-resolution computer monitors,but Firm A can do so at a lower cost.Cassie and David each want to purchase a high-resolution computer monitor,but David is willing to pay more than Cassie.Which of the following market outcomes is efficient?

Correct AnswerverifiedShow Answer

Which of the following will cause an increase in producer surplus?

Correct AnswerverifiedShow Answer

Bill created a new software program he is willing to sell for $300.He sells his first copy and enjoys a producer surplus of $250.What is the price paid for the software?

Correct AnswerverifiedShow Answer

At the equilibrium price of a good,the good will be purchased by those buyers who

Correct AnswerverifiedShow Answer

Welfare economics explains which of the following in the market for DVDs?

Correct AnswerverifiedShow Answer

Figure 7-17 -Refer to Figure 7-17.When the price is P1,area A represents

Correct AnswerverifiedShow Answer

Moving production from a high-cost producer to a low-cost producer will

Correct AnswerverifiedShow Answer

Consumer surplus is

Correct AnswerverifiedShow Answer

Consumer surplus is the

Correct AnswerverifiedShow Answer

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